Child, work tax credits have potential to transform island poverty rate
By John McPhaul
More than 304,000 could benefit this year from the Child Tax Credit (CTC) and 466,000 families from the Credit for Work, which together represent a profound impact on their pockets and on their economic mobility and an injection into the Puerto Rican economy of up to $2.56 billion, the Institute for Youth Development (and the non-profit Open Spaces) said in report issued Tuesday.
Economist María Enchautegui, director of research at the Youth Development Institute, said the economic injection of the CTC, or Child Dependent Credit, could reach $1.76 billion if 100% of eligible people claim it, or $1.4 billion if 80% request it. The work credit would represent another $800 million in disbursements in 2022, said economist Daniel Santamaría Ots, senior analyst of public policy at Open Spaces.
With the CTC, families could get $3,600 for children from 0 to 5 years old or $3,000 for children from 6 to 17 years old. Meanwhile, people who work and have incomes of less than $ 44,000 per year may be eligible to receive up to $6,500 for the work credit, after the redesign of that incentive as of the current tax cycle. Both credits have the ability to improve the economic conditions of families living below poverty levels, the economists said during a round table.
“The CTC is going to have a momentous effect on low-income families in Puerto Rico,” Enchautegui said. “These benefits can transform the quality of life of children and young people. In addition, it presents a great opportunity to maximize the potential of childhood in Puerto Rico.”
Enchautegui estimated that 304,000 families are eligible in Puerto Rico for the CTC, which represents 565,000 minors between the ages of 0 to 17 years. The average income of families living below the poverty level and accessing the credit would increase by 53%.
If married couples with minor dependents and incomes below $150,000 and single-parent families with incomes less than $75,000 are taken into account, at the municipal level the five-year estimates reveal that:
• In 34 municipalities, more than 99% of families with children and young people qualify.
• The municipalities with the highest number of minors are Arecibo, Bayamón, Caguas, Carolina, Guaynabo, Ponce, San Juan, Toa Alta and Toa Baja.
Santamaría Ots noted that 466,000 families are eligible for the work credit, the maximum limit of which was increased from $2,000 to $6,500 as of this year. The amount varies according to income, number of children and if the person is married or single. According to the experience in the United States, the work credit, in addition to improving the economic security of the people who access it, encourages work and increases the formal workforce. For every $1 invested in credit, there is a return of $1.50 to $2 for the economy. A recently published study by Open Spaces using 2019 payroll data estimates that some 124,925 people could cross the poverty line if they receive the work credit. This number can increase considerably if one considers the people that the credit encourages to file a return and move from the informal to the formal economy.